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On analysing the case of setting aside the lease of Hutt Limited, it is important to lay emphasis on the fact that this case reveals possible controversies which may arise between stakeholders in case of duty breaches and violation of terms and conditions of contracts. At the same time, the aforementioned case reveal the complexity of the definition of the party which stands on the right ground and the court should be very careful to define the winner of the case. In this regard, it is important to take into consideration positions of both parties, the lessee and the liquidator, and to analyse the case in details to take the right decision. Nevertheless, it is obvious that the breach of duty did take the place and shareholders suffered from the breach of duty that actually allowed the liquidator to insist on setting aside the lease of Hutt Limited.
The position of the lessee
In actuality, the lessee has a strong position because he can refer to the past errors made by his parents, who are presumed to be responsible for the breach of duty from the standpoint of the liquidator. At the same time, the lessee has chosen the clear strategy of denying the breach of duty from the part of his parents, who performed functions of directors. Instead, the lessee attempts apparently to make shareholders responsible for the breach of duty, whereas the lessee insists on the formal disengagement of his parents into the breach of duty. In fact, this strategy is quite effective and, as the matter of fact, this is the only strategy that gives the lessee any chances to win the case. Otherwise the breach of duty from the part of his parents is obvious. Therefore, the shift of responsibility from the lessee’s parents to shareholders is logical, although the shareholders position themselves as victims of the breach of duty from the part of directors.
In this regard, it is important to dwell upon the position of the lessee in details. As it has been already mentioned above the lessee denies the breach of duty from the part of his parents insists on the breach of duty from the part of the shareholders. To prove his position, the lessee insists that his parents were not directors formally because they were not validly appointed. At this point, the position of the lessee is grounded on the fact that his parents were not validly appointed to the position of directors. On the other hand, they performed functions of directors and they were actually owners of the business. In other words, in spite of their formal position as the lessee states it, they still performed functions of directors.
Furthermore, the lessee argues that there was no abuse of power from the part of his parents. In fact, this is a very important point in the arguments of the lessee because the absence of the abuse of power means that there was no breach of duty from the part of his parents. However, taking into consideration outcomes of the lease and the estimated fact that the lessee’s parents were not validly appointed as directors, there are actions are apparent abuse of power. In fact, even from the standpoint of the lessee, his parents were not appointed validly (Fruehwald, 2009). Hence, they could not take decisions concerning the lease because they did not have the power and authority to take such decisions. Therefore, the abuse of power becomes obvious.
Finally, the lessee argues that he as a lessee did not notice the breach of duty. Consequently, he was unaware of the breach of duty and performed his functions properly and respectively to his duty of care. On the other hand, such a position is quite arguable because the lessee was involved in the management of the company and he could not ignore or be unaware of the lease (McKendrick, 2005). In such a way, the position of the lessee is quite weak and he uses the defensive strategy although this strategy implies to shift the responsibility to shareholders, which, in actuality, proved to be victims of the misuse of power by directors.